Vacation Rental Markets “Toast” According to Redfin CEO

We've been very diligent about covering how the COVID-19 pandemic has affected the real estate market and advising our students in every aspect of how to come out of this in the best way possible.  Today we're advising our students to re-think their portfolios and avoid getting into any real estate deal that focuses on AirBNB as a source of income.  This pandemic has led to a massive decline in travel and a virtual shutdown of the hospitality sector, and Seattle based Redfin CEO Glenn Kelman recently called the vacation rental market “toast” in a recent article on MarketWatch.

The Vacation Rental Sector Gets a Nasty Holiday

Before we delve into that, let's introduce you to “iBuying” and the company, Redfin, who is featured prominently in the Market Watch report.  

The segment of Redfin called “RedfiNow” provides instant offers to people selling their homes and they have plans of jumping back into buying properties, joining other web-based buyers, commonly referred to as iBuyers, in getting back into the housing market.  Other companies in this space include Offerpad and Opendoor.  Zillow has also made plans to re-enter the space with it's dedicated buying arm, called Zillow Offers.

This segment of real estate investment companies is a small part of the overall real estate sector, but it's starting to grow, especially with social distancing and people avoiding human contact when partaking in transactions.  In Raleigh, North Carolina, almost 7% of the homes sold in the third quarter of last year were purchases by iBuyers, according to a report published in December by Redfin.  This led any other market in the US.

Redfin, which posted better than expected numbers while losing $60 million in the first quarter, said that virtual home tours and open houses are their way of surviving in this pandemic. 

Now, in terms of investing in vacation homes for personal use, vacation rental income, or AirBnb, that market is “toast” according to Kelman.  He cited that the AirBnb owners relied on a booming economy and platforms like AirBnb and other travel websites to get them bookings and essentially pay their mortgage and help them profit.  He cited that they don't have the deep pockets of Marriott Hotel Chains and Hilton Hotels.

Kelman added that major markets will be impacted the most due to the fact that companies in New York City and Seattle are quickly finding out how productive people can be working from home.  This, combined with a major shift in having land and space, is causing people to think about leaving major markets in droves.

Looking at the positive side of this, and knowing that there will certainly be some deals out there for people who perhaps weren't ready financially to weather a few bad months when they bought their AirBnb, tune into our Zoom call With Braydon Ross on June 3, which will talk about how you can get started with AirBnb.  

If you want to go straight to the registration page, sign up here.